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Closing Bell With Maria Bartiromo

News/Business. Maria Bartiromo. Analysis of the day's winners and losers in the stock market. New.

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01:00:00

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San Francisco, CA, USA

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Comcast Cable

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Virtual Ch. 58 (CNBC)

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mpeg2video

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ac3

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528

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480

TOPIC FREQUENCY

Us 15, Hp 14, Israel 9, U.s. 8, Ben Bernanke 7, Stan Fischer 7, Mike Lynch 6, Meg Whitman 5, Mr. Lynch 4, Rick Santelli 3, Faber 3, Kate Kelly 2, Bobby 2, Rob 2, Sac 2, Stan 2, London 2, S&p 2, Ayman 2, Gordon 2,
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  CNBC    Closing Bell With Maria Bartiromo    News/Business. Maria Bartiromo. Analysis of the  
   day's winners and losers in the stock market. New.  

    November 20, 2012
    4:00 - 4:59pm EST  

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stick around. stanly fischer on problems in the middle east and james grant, the great interest rate observer coming up on the second hour of the "closing bell." see you tomorrow. and it is 4:00 on wall street. do you know where your money is? hi, everybody. welcome back to the "closing bell." i'm maria bartiromo on the floor of the new york stock exchange. a two-day winning streak coming to a close tonight after chairman ben bernanke has warned the fed does not have all the tools to justify set the worst case scenario. here's how we're finishing the day. the market down about 90 points earlier. finishing well off the lows, down 12 points on the industrial average. as you can see, 12,783. last trade on the blue chips. nasdaq also gave up ground, off the worst levels. flat on the session at 2915. that's far from where it opened today. s&p 500 picked up 1/3 of a point. federal reserve chairman ben
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bernanke putting a damper on the markets this afternoon after he said the central bank does not have the tools to offset the full harm of going off the fiscal cliff. yet, rob morgan is not concerned. he says he thinks the fiscal cliff has been overblown. are they overblown? let's bring him in. rob joins me now along with brian ferhrry and rick santelli. rob, you're not worried about the fiscal cliff. >> i'm worried, maria. just like chairman bernanke is. congress and the administration have to get together, but, you know, the president's been very clear that he doesn't want necessarily higher tax rates. he wants more tax revenue. speaker boehner said, well, geez, we can get higher tax revenue just by closing a few loopholes, restructuring mildly the tax code. so i think the fix is in. it's just why hasn't it happened. they wanted to wait until after the election, see if both sides
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wanted to see if their hands were strengthened. obviously, the president has the strong hand. >> they sort of like taking everything to the cliff, to the edge of the cliff to get everybody nervous, i guess. feels like a déjà vu from last summer. rob, you make a good point. i understand it from mya mcginness, who created this fix the debt croup. she says if you take away all the loopholes and exceptions, you get $1 trillion. that sounds good, right? unfortunately a lot of those loopholes will not be touched t like the mortgage interest, the charitable donations. some of these will not be touched. how are you really going to take away the loopholes and exemptions and count on that? >> well, i don't think necessarily that we are going to get the huge grand bargain here, but at the same time, are we going to go off the cliff? the markets don't care necessarily if we get the huge grand bargain or not. they just don't want us going off the cliff. i think the fix is in definitely that we are not going to go over the cliff. >> all right. let's talk a bit more about
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that. brian, what's your take on this? >> you know, i have to agree. i think they work it out. i go back to a statement that boone pickens had on your show last week. it's really apropos. let the monkey do his thing. if you just wait, you'll get a better show. i think that's what's going to wind up happening with the market. right now we see a great opportunity going forward. >> rick santelli, what did you see today? this market finishing well off the lows. in fact, as we're settling out, it looks like we're finishing out just down seven points. had been 94. >> i agree with you. to me it makes perfect sense. i don't think there's any new information in what ben bernanke said. if you say things that imply a weak economy, the market will sell off every time you say it. the market did come back. i question both the guests' opinions. i think the fiscal cliff is important because a lot of it is self-inflicted, like the e is questions trags and defense cuts
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and jobs on that side. a lot of the issues like payroll taxes. social security lives hands to mouth. that contribution really isn't a tax anybody should cut. so i guess what i'm getting at is the reality of ben bernanke's statement isn't something new. whether you address the fiscal cliff or not, what we're left with afterwards is no party either. >> good point. back here now with gordon. what an end of day today. what did you see in terms of money flows? >> it's a holiday week, maria. we're just going to have to accept there's not going to be much going on here today. just like everybody's been talking about, it is about the fiscal cliff. this isn't a y2k event. we're not talking about the date will come and it may not be an issue if they don't resolve this thing. if they don't get to it, we're going to have a problem. it's going to mean jobs. it's going to mean a significant effect on gdp. the option of that, of course, is if they come up with some sort of workable arrangement here, and i don't mean where they end up with high taxes and
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austerity measures, but we have reasons to believe the market can go up too. housing is up. we're starting to get to energy independence, which is important as we get into the mideast problems. you're talking about the bernanke put, if you will, which is still in play. you know, there's reasons it will go up if they get it rectified in time. >> i'm all about, let's prepare for the reality of it. if we go over the fiscal cliff, we go over. how do you prepare if it? you have to put money to work regardless of the environment. i've been hearing lately a lot of the wall street firms have strategies. they're telling their clients what to buy, what to sell if, in fact, we go over the cliff. so what's your strategy, brian? let's say hypothetically speaking there's no deal by december 31st. what do you want to do in terms of strategy? expose yourself to winners and avoiding losers around fiscal cliff. >> well, i think that we're taking the policy that, you know, we're in that mind set of you don't fight the fed.
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we think it continues. we like the housing sector. we like, you know, kind of the building products. we like those surrounding groups that we think with bernanke keeping interest rates low and buying these mortgages, they're going to work through, you know, not just the fiscal cliff but well into the future. >> so are there stocks or sectors that you think will be benefitting or getting hit as a result of the fiscal cliff issues? in other words, defense companies will have to cut jobs, transportation companies will have to cut jobs, construction when those spending programs go away, capital gains will go up, dividend taxes are going up. in terms of a real strategy, what is it? >> you know, i think my biggest concern with that is going to be a kind of in those large cap value companies that have been doing so well because of the high dividends they're paying. i see some huge risks there. you know, i prefer domestic companies. if we can see some small caps and mid caps, you know, that have cash flows, that's kind of
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what we're liking. >> do you have a strategy, gordon? >> the bottom line is corporate america's balance sheet is still good. you have to start to get into a defensive strategy. gouk wi you can go with the majors. position yourself if case something happens. housing is a good area. seems to be a bit recession proof, or at least less likely to feel the effects of the fiscal cliff. yeah, you've got to be nimble here. you have to be prepared. you have to have your hedging strategy. this is a real professional's market going into the end of the year. >> rob, real quick, do you have a strategy? >> i still like the large-cap stocks. even though they pay dividends, they're going to be adversely affected if with go over the cliff, they're multinationals that can reach into the emerging pockets of the world where growth is. i think they're good for a choppy market. >> gentlemen, thank you. >> what about munis? tax advantages. >> absolutely. >> good point, rick. >> good spot. >> rick santelli has a fiscal strategy.
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i should have known. thanks, everybody. we'll see you soon. gentlemen, thank you. not the rally we had yesterday. not by a long shot. over to bertha coombs. >> we did close off of the lows. information technology was the worst sector of the day while we saw health care was higher. consumer discretionary. that was really fueled by the housing sector after that strong housing starts report this morning. housing starts at a four-year high. pulte homes one of the day's best gainers. the biggest gainer to date, up over 165% in 2012. lennar is up 94% year to day. masco, that topped the s&p 500 today. whirlpool rising to a two and a half year high. heart pump maker heartware surging after the fda approved its left ventricular assist device. it's a smaller implantable version of the heart pump that helped keep former vice president dick cheney alive
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before his heart transplant. technology was definitely the big stinker of the day. hp hitting a ten-year low after the massive write down on accounting issues with its autonomy acquisition. collateral damage spreading to ibm. apple back below correction territory, down 20% from its all-time high. and the huge disaster of the day, all bad news coming from best buy. its earnings report worse than it had warned. closing at a ten-year low. the cash flow outlook not looking very good there, maria. probably a lot of markdown there is as they try to move inventory. >> all right. thanks so much. we'll be watching that. meanwhile, federal chairman ben bernanke giving the market a wake-up call a few hours ago. >> in the worst case scenario where the economy goes off the broad fiscal cliff, i don't think the fed has the tools to offset that. >> jim grant, editor of the closely read newsletter "grant's
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interest rate observer" will give us his reaction next. wait until you hear what he thinks the biggest issue we should all be worried about is. get this, he says it's not the fiscal cliff. not even close. >> later -- >> we believe that there is a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company. >> hewlett-packard ceo meg whitman first on cnbc this morning. the accounting scandal broken by our own david faber. he'll join me with what happens next at the troubled technology giant. also ahead, no deal on a cease fire yet. we will get a front line report on the talks between israel and hamas militants. also with us, bank of israel governor stan fischer gives his assessment of the financial impact of the latest conflict. why the rest of the world and the usa needs to monitor this. don't miss my interview with stan fischer coming up. americans are always ready to work hard for a better future.
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>> welcome back. >> looks like a beat on the bottom line. reporting at 33 cents. a penny better than expectations. revenues were higher as well. and the firm is also boosting
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its full-year guidance. now expects to book more than $4 billion in revenues coming up in the next year. that's above the expectation on the street. they say the strength is given to strong customer response to their next generation social and mobile cloud technology. those are magic words these days. >> all right. they sure are. thanks very much. meanwhile, ben bernanke urging lawmakers today to resolve the looming fiscal cliff. he says failure to do so could pose, quote, a substantial threat to the u.s. economy. >> the realization of all the automatic tax increase and spending cuts that make up the fiscal cliff absent offsetting changes would pose a substantial threat to the recovery. indeed, by the reckoning of the congressional budget office, the cbo, and that of many outside observers. a fiscal shock of that size would send the economy toppling back into recession. >> but the fiscal cliff does not really worry my next guest.
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he describes it as the y2k of the moment. joining me now to explain is a well-known fed critic jim grant. he's founder and editor of "grant's interest rate observer." you say this is like y2k. no big deal. came and went. you're not worried about it. you say the markets aren't going to fret over it. >> i don't mean to be quite so dismissive. certainly my experience of problems that are most ventilated are the ones that are least menacing, in fact. the more you talk about something, the more it's likely to be discounted. we've done nothing but talk about the fiscal cliff. >> at the time all we did was talk about y2k. >> right. i'm thinking this is the not thing. >> so what we're not talking enough about is what the fed's stimulus policy has been. is this a bigger threat? is this a bigger worry for you? tell me what you're worried about. >> the fiscal cliff is the
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present value of these immense unfunded liabilities. numbers of $80 trillion and up. the question is whether there will be good dollars to pay back those who have lent against those liabilities. it seems a stretch to think there will be. but there's many years to come yet. so we have a fiscal problem. it requires growth and requires good money. it does not require skies full of paper dollars, such as a the confetti we're seeing from the fed. >> it's unbelievable to me. the demographics of this this country have changed so much. we're living longer. we're needing, you know, medicare longer. folks are even, you know, working longer. yet, these programs have not been changed in so many years, or ever. >> well, i think we might get around to doing this.
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but december 21st is not what it's going to happen. all the talk today and tomorrow will be about the fiscal cliff. that's not the thing. in the meantime, in the background, there's these very interesting assertions of what is and is not risky. the financial times had a piece observing that for the first time in 50 years british life insurance companies or pension funds held more bonds than stocks. it reminded me of the fact that fidelity is now managing more bonds than stocks. the world over there is a, if not a migration, then certainly a movement towards those assets certified as safe. it seems to me given the backdrop of what our central banks are doing, the assets certified as safe are almost sert fcertifiably unsafe.
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145 years in operation, great franchise. so what is the risky asset? it seems to me that the world is set up for something that has nothing to do with the validation of this claim that bonds are safe. >> meanwhile, people are actually losing money by keeping their money in fixed income. you're not getting any return. today bernanke said at the economic club lunch that he didn't want to suggest that the economy is going to be troubled until 2015 just because he's keeping rates at low levels until 2015. what are the implications of keeping rates at those levels until 2015? >> what we have done in this election is not only re-elected the president but re-elected bernanke-ism. he'll leave or not in 2015. there will be someone to succeed him that will be as liberal or dubbish as he is.
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our economists dream up this formula that describe the path they say of economic activity. they provide the confetti or the money to finance the path of growth or nongrowth. it is the triumph of a seat of the pants central banking. this is what the country has signed up for with bernanke and his evident successor. that, to me, is a substantial problem on the horizon. next to this, the fiscal cliff. >> this is the reality we face. so what do you do an as investor? we have institutions watching, individuals watching, who are trying to figure out what this means to them. >> it seems to me you look for investments that are orphaned by the conventional investment thing. something like metlife, for example. look for companies that are trading at discounts to their
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evident intrinsic value. you pay less and less attention to things like the fiscal cliff and more attention to old-fashioned security analysis. that's not going to guarantee you any returns, but it's not going to guarantee you peace of mind come the next liquidation. over time, stocks bought well are going to do well. over time, bonds yielding nothing are not going to do well. >> so are bonds today's bubble? >> i think so. >> okay. you can't ignore the fiscal cliff entirely because most people think that if we go over the fiscal cliff, we go back into recession in 2013. does this worry you? >> well, no, because i think it's not going to happen. i don't mean to sound as if there's no chance of it happening. to me, this is not the thing to worry about. there are others. this, i think, is going to be resolved. there will be some grand bargain and we'll wake up and the dow will be at 500 points and it
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will be lovely. then we'll face over other difficulties. the fiscal cliff to me is not the thing. >> were you surprised that bernanke said, look, if we go over the fiscal cliff, we have though more tools? >> he really has no tools to fix a lot of what ails us. yet, they keep on trying. there has been qe-1, 2, 3. they're manipulating the curve of the yield. all these problems that would seem to be susceptible to mainly working, saving, repricing error, restructuring debts. instead, we have the great reign of fiat currency. the european central bank, the bank of japan, the bank of england. everyone is cranking and cranking. i think the poser teterity wil back and say, how? the central banks were reigning fiat currencies. >> unbelievable. jim, great to talk with you. by the way, we're going to talk with stan fischer from the israeli central bank. >> tell him i said hello. >> i will do that.
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thanks so much. jim grant joining us here at the nyse. we have breaking news in today's big insider trading case. let's get to kate kelly. >> maria, sac capital and stevie cohen, their founder, have broken their silence, at least for today in terms of the latest element in the federal prosecutors case looking at insider trading in a number of situations and focusing on many had former employees of sac. they say in terms of the latest case made today, which is against a former sac employee named mathew martoma, say they're cooperating with the government. cohen is outraged with folks formerly employed by his firm and have gone rogue. in this case, the language is no different, maria. essentially, more of the same. we're cooperating and we're concerned about the allegations.
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>> so that was the statement then? >> yes. >> thanks so much, kate kelly with the latest there. we'll be checking back as the news warrants at sac capital. no truce, yet, meanwhile. israel and hamas militants in talks on a cease fire. stan fischer will give us his insight. >> also ahead -- >> we feel like there was very serious accounting improprieties, financial disclosures that were not made appropriately. >> hewlett-packard ceo meg wi whitman first on cnbc this morning. up next, last chance to save the twinkie. not to mention more than 18,000 jobs. we'll have the latest developments next. stay with us. [ male announcer ] you are a business pro.
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you know, one job or the other. the moment i could access the retirement plan, i just became firm about it -- "i'm done. i'm out of here." you know, it's like it just hits you fast. you know, you start thinking about what's really important here. ♪ ♪ welcome back. the future of hostess up in the air as the company and its bakers union entered mediation talks. kayla is here with the latest on whether the twinkie and wonder bread will survive. >> well, mediation is taking place as we speak at law firm jones days offices in new york, essentially a chaperoned negotiating session between hostess and its bakers union which has voted against previous
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wage and pension cuts, forcing the company toward liquidation. because the meeting is closed to the public, we won't know whether they were able to reach an agreement until the session has ended. they've been camped out at those law firm offices since 1:00 p.m. today. mediation was requested by a u.s. bankruptcy judge yesterday who noted a private negotiation had not been attempted and should be before 18,000 jobs are put to pasture. we spoke to the ceo outside the courthouse yesterday. he said he would support anything that saved jobs. several potential bidders could take twinkies and other brands off of hostess' hands, only if it liquidates. they could kick the tires on an investment, but it's unlikely there would be a buyer for the whole company. that will be the scenario if a deal isn't reached today. there's an 11:00 a.m. court appointment tomorrow on a potential liquidation. >> all right, kayla. thanks very much.
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we'll be watching that as it develops. so what happens next? hewlett-packard disclosing an $8.8 billion accounting charge this morning because it massively overvalued a company called autonomy that hp acquired last year. hewlett ceo says her company was duped. the founder of the company at the center of the controversy is up next. he's going to give us his side of the story exclusively. autonomy founder, michael lynch here with me coming up. join me for that. up next, the latest conflict between israel and hamas rippling across the globe. bank of israel governor stan fischer speaks with me after this short break. how's this for a geek factoid? fischer gave bernanke an "a" plus when he studied under him at m.i.t. stick around to see if he's still making the grade for stan fischer. a restaurant is hard, try running four. fortunately we've got ink. it gives us 5x the rewards
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welcome back. a cease fire between israel and gaza is reportedly just hours away and could end seven days of fighting. nbc's ayman is in gaza with the latest. over to you. >> reporter: well, good afternoon. you could probably have heard
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that sound 45 seconds ago of a loud israeli explosion. there's no truce going into effect tonight. that's not only a reality here on the ground with drones flying above and fighter jets pounding the gaza strip for a seventh consecutive night. hamas officials have also confirmed there will be no signing of a truce this evening. u.s. secretary of state hillary clinton is in israel. she's meeting with israeli officials. people are hoping a truce that was reached tentatively could be announced publicly on wednesday. as of right now, though, it's going to be another long night of bombardments and palestinian rocket fire into southern israel. people are bracing themselves for what could be another deadly night here in the gaza strip. >> all right, ayman. thank you so much. the world watching how the events unfold in israel. bank of israel governor stan fischer is with me now with reaction. good to have you on the program. thanks for joining us. >> thank you, maria. >> what can you tell us about what's happening on the ground
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right now? how are you, the environment that you are in, talk of a cease fire, what are you hearing on the ground, stan? >> well, we just follow the news from you and from others, and it looks like this is going to be postponed for at least a day. but in terms of what's happening in the economy, which of course we follow very closely, it depends how long it goes on. so far there are no major impacts. the financial markets are very stable. there are no big movements. the stock market's pretty stable, and if this ends in a day or two, we'll come out of it without much impact on the economy despite all the very difficult scenes that we're seeing at the moment.
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>> stan, last week you said the israeli economy may grow faster than the 3% next year many were expecting. are you sticking with that? what have these events done for your forecast and for activity on the ground? economic activity. >> well, at the moment, they're slowing things down. though, not very much because economic activities going on in most of the country and even in the south. factories are still working. there is some slow down, not much. it'll end as soon as there's a cease fire. the past two operations i've seen, the second lebanese war, and the incursion into gaza in 2009 left no traces on the economy.
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afterwards the economy bounced back and caught up with everything that had been lost. i'm pretty sure that's what will happen this time as well. after the fighting is over. >> how are you expectedi inexpeo play out? all-out war? what are the implications here, stan? >> i think the implications are pretty straightforward. the more fighting that goes on, the longer it goes on, the more intense it is, the more the immediate damage. the longer it will take to recover from it. the war in 2006 was 33 days, and in that quarter, gdp actually fell. in the next quarter, it rose by 10%, and that wiped out the entire economic impact of the war. and we also start this in a pretty good position. the inflation rate is at 2%.
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the balance of payments is more or less balanced. the stock market's been rising lately. so i think -- and we're pretty close to full employment. most of the indicators are very positive. we started well. if we run the economy carefully, as we will try to do, we'll come through this okay. growing around 3%, which is lower than we would like, but given that the rest of the world is very slow, it looks like a decent growth rate. and i don't know about next year. i didn't know this was about to happen when i said things were beginning to feel better. they were beginning to feel a little bit better. we'll see what people think after this fighting is over, which, of course, we all hope will be very soon. >> stan, our thoughts and prayers are with you and so many had in the region. thanks very much for joining us
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today from tel aviv. we appreciate your time tonight. >> thank you, maria. >> see you soon. stanley fischer joining us live in tel aviv tonight. meanwhile, the other big story of the day, hewlett-packard ceo meg whitman in damage control over an $8.8 billion accounting irregularity. up next, we're getting to the bottom of the mess with mike lynch. stay with us for that special interview. ♪ [ female announcer ] today, it's not just about who lives in the white house,
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welcome back. autonomy front and center here today concerning its role in the $8.8 billion writeoff at hewlett-packard. this is what ceo meg whitman told us today. >> we believe there's a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company and mislead potential buyers, including hp. we stand by the forensic review we've seen. as you know, we've turned this over to the sec. >> and we have exclusive reaction right now to this claim. autonomy's founder, mike lynch, is with me. good to have you on the program. thanks for joining us. >> good evening from london, maria. >> so you just heard what meg whitman said. you know the allegations. what is your response? >> we're shocked. we've been pretty ambushed by this today. first we heard about it was a
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press release. you know, we utterly refute them. these are absolutely factually incorrect. we'd like to know more about them. i'm afraid the details haven't been shared with us. so what we do know is that autonomy's numbers each quarter went up to you are auditors. they applied the ifrs accounting, which is a little different to the u.s., and produced the accounts. we know that that process was done. i find it hard to believe that they would not have got that correct. >> so you say you have no heads up on this, number one, and that these allegations are wrong. these are very serious allegations, obviously. when the company was sold, what kind of due diligence was done? >> well, it's what hewlett-packard described as meticulous. it had 300 people. it was very intense. it had kpmg. it had barclays. an incredible amount of work was
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done. we'd be talking about a massive elephant in the room that wasn't spotted. the reason it wasn't spotted is simple. it wasn't there. there was nothing for the due diligence to find. it was done in their own words meticulously in great detail. then they actually ran the company, including doing all of the books, for the last four quarters. >> so obviously something has gone on here. you're talking about an $8.8 billion write down from hp. what do you think happened? >> i think there's been significant mismanagement of the company. so the company was brought in when there was one strategy from the board, which was to divest hardware and do software. there was then one of these things you get every so often at hewlett-packard and a new ceo comes in. the other divisions are in power. autonomy's not been relevant. wait in which it's managed leaves something like 300 of the key staff leaving, the top of
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the management team. i was the last of the top management team out in may. you know, it's very hard to run a business when you're losing talent in the software business. i'm not familiar with what has happened to the business since i left, but i assume from today's write down we can assume the numbers are got worse and worse through this management. so a write-off has been required. >> tell me about the details surrounding your exit from hp. why did you leave? >> what happened at hp was that i came up. we had a couple quarters where the numbers were going pretty well. it could have been a bit better, but fine. we had a quarter where hp imposed a whole slew of rules. for example, if a customer had an hp services agreement, the deal had to go through them. they insisted on putting up the 30% markup. suddenly price went up 30%. if you're in hp sales, you got paid to sell autonomy's
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competitive product but not autonomy. therefore, you sold a competitive product. there were a series of issues which meant that sales slowed. that was the point where as pretty much the last of the main management team had become incredibly frustrated with this and the bureaucracy and losing so many people. that's when i went. >> have regulators contacted you? >> no, we've had no contact from hewlett-packard, from regulators, from anyone. all we have is a press release. >> so you were blind sided by this. you heard this in the news and through a press release. no one called you from hp? no one has alerted to you this in in the past weeks and months to tell you they believe this was complete fraud at autonomy? >> no, last time i met with hewlett-packard was in june when i was invited to a meeting to discuss transition and leave. there, some deals were brought up. i explained how they worked as part of the transition period.
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i've heard nothing until this press release today. >> how often was autonomy audited? who was in charge of those audits? >> autonomy was audited quarterly just like a u.s. business. those were done by delloyd. >> have you exacted them about these allegations? what have you done since reading about this in the press release and seeing these accusations from meg whitman and the executive team at hp? >> well, because it's a very strange way to do these things, just sort of completely ambush someone and not give them the opportunity to respond, what we've been doing is running around trying to find out what's being said and then getting the management team together to we can make a joint statement. we did where we flatly and absolutely refuted this idea. >> i mean, do you have any idea how they would arrive at these figures? do you have any idea, you know, how this happened and how they are saying that, in fact, there was an intent to mislead
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investors? >> i don't. until we actually see the details, we won't know. you know, one word of warning i would say to some of the commentary i'm seeing around this, it is important to understand that the accounting roles under ifrsr differ to u.s. gap. so to you have to bear that in mind. one would have hoped hewlett-packard did that when it did its due diligence. >> can you explain that a little more? how different are we talking about? what's the difference in terms of the rules in the u.s. versus other oversight? are we talking about $8.8 billion difference? what's different? >> well, there are differences in exactly how things are accounted for. no, there's no basis here for saying there's an $8.8 billion difference. you know, that is a massive amount. i don't believe you could do due diligence with all those people, all those experts, many of which are still at hewlett-packard, of
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course, and see something missing that was that big and not notice it. the only reason you could not notice it is it wasn't there. >> so, you know, here is a company that you founded. this is your company that was sold to hewlett-packard. now these incredible allegations of fraud against your company. of course, hewlett-packard losing so much of its value. what are you thinking right now? how do you feel about this? >> well, i'm very sad, to be honest. it took us ten years to build the business. it was a great business. even today hewlett-packard talks about the technology being world class. we've seen so much destruction in the mismanagement in the last year. i feel sorry for the great people that went through that process. obviously, many of them left and will hopefully go and do other great things. it's a sad day. the important thing is, you know, hewlett-packard its needs to concentrate on its core problems. this has come out on a day when
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they've probably got the worst results in the 70-year history of the business. they've got major issues in their core business. that's what meg should be concentrating on. that's what she needs to fix. that's what will make hewlett-packard a great silicon valley company again. >> suspect isn't it true your rn is on the line? do you plan to sue? who do you blame? >> what i need to do is find out what it is they're saying. then we will be happy to explain whatever it is they might be confused about. >> i can read you one quote. we believe there's a willful effort on the part of autonomy leaders to mislead potential buyers, including hewlett-packard, and we stand by the forensic review that we've seen and as you know, we've turned this over to the securities and exchange commission. that was her quote. >> i don't even know which members of the autonomy
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management team they're referring to. they haven't even informed us of anything like that. the reality of what we know is we delivered the correct information to the auditors. i have every faith that they did the numbers correctly and those were reported. so i absolutely flatly reject this premise. >> all right. mr. lynch, it's good to have you on the program. we know this is a developing story. would you please come back as more details become available? certainly our viewers and shareholders would like to hear from you again. >> very happy to. thanks very much. >> thanks very much. we'll see you soon. mike lynch joining us live want to from london. we get reaction now to my interview with autonomy founder mike lynch up next. wait until you hear what our david faber who broke the story this morning has to stay. stick around. the story continues. give her e. yeah, you -- you know, everything can cost upwards of...[ whistles ] i did not want to think about that. relax, relax, relax. look at me, look at me. three words, dad -- e-trade financial consultants.
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we get immediate reaction to what mike lynch had to say about allegations from hewlett-packard against autonomy. our own david faber broke the story of the loss today. david, good to see you. congrats on the unbelievable scoop. what do you make of mike lynch's comments? he's throwing it back at hp. >> you know, interesting.
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glad you had him on. there are two sides to this. it's good to have heard from mr. lynch. certainly as you pointed out his reputation is one that will need mending, it would seem. one only knows what will happen given this is both what the s.e.c. and uk's serious fraud office in terms of their investigation having taken what hp gave them. as for his contention, you know, what i have a hard time understanding is why hp would do this other than that it fully believes that it is correct in its assumptions about the various things it alleges here. there is nothing to have been gained by putting this forward in any way, shape or form other than they felt it was the right thing to do after a seven-month investigation acting on a tip from an insider at autonomy. someone fairly senior but only spoke out after mr. lynch exited hp late spring. we'll see. he didn't answer specifics, of
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course, in terms of some of the charges we have outlined in terms of what they did, revenue recognition. and their lack, perhaps or aggressive nature of the revenue recognition in many instances. >> he said when he left the company it was in good stead and that none of this was at all apparent when the acquisition happened. and that hewlett-packard is facing a massive problem in its business right now. what is your take on what he said that the rules in terms of gap in the u.s. versus international overseeing roles are different? >> that may well be the case. i'm no expert in terms of the differences in accounting rules. i will tell you that if it is to be believed what hp is alleging, it's hard to imagine it's not something that doesn't constitute fraud, namely that they sold hardware at a loss to supplement revenues. didn't accrue the cost at all but sent it to marketing so the
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gross margins look better. they had customers pay high up front licensing fees and gave them back end deals in terms of hosting that were smaller. they paid value-added resellers to have the money come back to them from the resellers who bought their important software. making it appear like there was a great demand from original equipment manufacturers. those are the things being alleged by hp in terms of what's behind what they found from the investigation, maria. you know, i find a hard time believing that regardless of whose law is in place, that doesn't seem to be something you want any company doing. it may well be against the law. >> isn't there a misstep here and due diligence? how is it we learned this today. i understand there is a seven-month investigation having gone on. but who failed and who was accountable in terms of the due diligence that should have been done before the deal was going through? >> i think you can find failure in a lot of places. certainly there are going to be
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questions we have raised today. we haven't heard from. mr. lynch came on. we haven't heard from deloitte that did sign off on and audited the financials at autonomy. there is also perhaps blame to be laid at the feet of the former ceo of hp and his team for not doing enough due diligence. you know and i know plenty of people were questioning autonomy out there in the jemt arena. plenty of blame to go around. >> jim chenos said the accounting the horrible. we'll see you soon. david faber with the latest there on hp and autonomy. big comeback in the markets in the final stretch of trading. more after this break. ? i heard you guys can ship ground for less than the ups store. that's right. i've learned the only way to get a holiday deal is to camp out. you know we've been open all night. is this a trick to get my spot? [ male announcer ] break from the holiday stress. save on ground shipping at fedex office.
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welcome back. take a look at the day on wall street. the dow industrial is down well off the lows. we had buying in final hour. down seven and a half at the close despite ben bernanke saying he's out of tools if we go over the fiscal cliff. it needs to be avoided. dow industrials down 12,788 last trade. nasdaq picked up ground just a fraction. it, too, has

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